High Gas Prices Affecting Businesses Large and Small

For many businesses, this year’s increases in gas prices are taking its toll on profitability. Corporate giants such as Walmart (WMT) all the way down to family owned flower shops are dealing with the consequences of $4 a gallon gasoline.

Today’s high gas prices are also especially hard for those who rely on commercial vehicles as a large part of their business. For these companies, even a small increase in gas costs can be detrimental. Many are absorbing the costs and carrying on business as usual, hoping that the reports saying gas prices will drop again this summer are true. Other companies have been forced to raise prices.

Companies that rely on house calls or deliveries have been affected more than most. Pizza delivery, flower delivery, plumbers, HVAC – anything you can think of that has to be there in person to complete a transaction.

Piper Jaffray analyst Mitch Kaiser has noted that when gas prices rise, retail sales fall for stores such as Target and Walmart. Kaiser says that retailers are affected in two ways: First, consumers cut back on their trips to the grocery store, or any other store that carries even the most essential items. Many people have to spend less money when gas prices rise.

When the price of gas rises just 5 cents a gallon, that’s maybe an extra $10 per week. When it rises 15 cents or more, that can translate to $20 each week out of the pockets of many who can’t afford to add an extra $80 to their monthly budget.

Retailers such as Walmart and Target rely on high volume to make a profit, and since the demographic of companies like WalMart are the lower income population, these customers are affected more severely than other stores.

In addition to the low income families being affected by rising gas prices, there is another category of low wage earners that have a hard time with it: Teenagers. Teenagers, often working for minimum wage or getting allowance from their parents, don’t have the extra money to put in to their gas tanks when gas prices rise.

Retailers such as Abercrombie & Fitch and Forever 21 are two examples of higher end retailers who see a decrease in traffic, when teenagers don’t have as much money to spend. In addition, mall traffic sees a measurable decline, since many of the stores in malls are discretionary in nature.

The good news is that relief may be in sight. Crude oil has dropped below $100 a barrel, and gas prices have decreased a few cents in the past week in most parts of the country. There has never been a year like this, to my knowledge, where gas prices are actually decreasing the week before the big Memorial holiday weekend.

If your business has been negatively affected by the recent increases in gas prices, now may be a good time to consider GPS fleet tracking. A fleet tracking system can significantly help you to cut fuel costs, increase efficiency, and reduce vehicle emissions. Most businesses see a positive ROI in less than 6 months.